To achieve a bonus today, most revenue managers are only tasked with exceeding top-line targets, like revenue variance to budget and variance to last year’s revenue. Plus, a favorite metric that hotels use is RevPar index, suggesting most owners want to see performance relative to the compset, instead of internal benchmarks.

While revenue managers are ultimately responsible for delivering profits to their properties, current incentive programs motivate RM teams to prioritize driving up revenues over the bottom line.

Take an Honest Look at Channel Costs

Revenue managers must be cognizant of, and accountable for, costs and how they impact the bottom line, Spaccio said.

One of the biggest missteps under current incentive plans is that revenue managers aren’t motivated to pay close attention to which channels are costing the hotel the most and on the other end, which channels offer the most value.

The Vital Bottomline: Revenue Managers Should Impact Profits, Not Just Revenue

It’s time for hotels to maximize their profits by restructuring their revenue management incentive plans.

“After all, owners can only take profits to the bank,” Spaccio said.

First, motivate revenue managers to get well-acquainted with costs and learn where to reduce wasteful spending. They should be well aware of the cost per booking and your hotel should establish how much those reservations should cost.

Then, at the minimum, a revenue manager should meet or exceed your gross operating profit projections BEFORE being paid a bonus off the top-line incentive.

Continue to reward revenue managers for generating revenues beyond the forecasted targets, but in the end, incentives should be driven by the ability to exceed profitability.

It’s only with the proper incentives in place that revenue managers will pay more attention to the true net of any booking and prioritize boosting your bottom line.

About Tambourine

Tambourine uses technology and creativity to increase revenue for hotels and destinations worldwide. The firm, now in its 33rd year, is located in New York City and Fort Lauderdale. Please visit: www.Tambourine.com